The top U.S. futures market regulator on Friday fined hedge fund EMF Financial Products LLC $4 million for making false statements about its market positions relating to U.S. treasury note futures.
In addition to the fine, the Commodity Futures Trading Commission order also restricts EMF's registration as a commodity pool operator and commodity trading advisor for three years.
The charges stem from an incident in August 2005, when the CFTC says EMF misrepresented its positions regarding the September 2005 U.S. Treasury Note futures contract to the Chicago Board of Trade.
EMF said it was pleased that it had reached a settlement with the CFTC. The company said the fine would be borne solely by EMF, not by fund investors.
We are gratified to finally put this matter behind us so that we can continue to focus our full attention on successfully managing our clients' investments, the company said in a statement.
The CFTC said EMF failed to fully disclose to the CBOT its control of up to $11.9 billion of the underlying cheapest-to-deliver security on the September 2005 contract, even as it held a significant large long position in the same contract.
New York based EMF only fully disclosed its position in the cheapest-to-deliver security after CBOT submitted a written request for the information, the CFTC said.
Under the CFTC order, EMF will have to comply with reporting requirements to the CFTC related to its trading, establish a risk management committee, and implement a system of internal controls.
The company will also have to submit a report on its compliance to the CFTC and reveal the CFTC order to employees and investors.
(Reporting by Ayesha Rascoe; editing by Jim Marshall)